Challenger bank Tide backs calls for SME tribunal

Digital challenger bank Tide has backed calls for a tribunal system for small businesses to settle disputes with their lenders, but said that increasing competition in the banking sector would go further in protecting firms.

It comes after the influential Treasury committee recommended the creation of a financial services tribunal with stronger powers to provide redress for small and medium-sized enterprises (SMEs) that have been unfairly treated, but was rebuffed by the Government.

It prefers an ombudsman-style approach rather than a tribunal to resolve disputes.

Oliver Prill, chief executive of Tide, an SME specialist bank, told the Press Association that he supported further regulation of the SME lending market, including a tribunal, but that greater competition would address many of the issues in the banking sector.

“We are very open to regulation of lending, we’re very open to the idea of the tribunal.

“The only thing we’re saying, make it very pragmatic, right? And, you know, make it digital friendly.

“But beyond that, I think, if that’s what it takes, you know, do it … but also think of making the market more competitive, because then you wouldn’t have as many of these problems in the first place.”

Calls for greater regulation for SMEs follows scandals at the Royal Bank of Scotland and HBOS in the wake of the financial crisis.

RBS’s now-defunct Global Restructuring Group (GRG) was accused of pushing small businesses towards failure in order to pick up assets on the cheap.

While fraud at the Reading branch of HBOS, which was acquired by Lloyds, saw corrupt financiers jailed over a £245 million loans scam which destroyed several businesses.

Mr Prill said the threat of losing customers would motivate the big high street banks to treat customers fairly, but not many SME customers were switching lenders.

“The [banking] oligopoly in particular … can get away with this sort of behaviour without SME customers massively leaving them – not talking about the ones that are affected, but those that are saying ‘oh, well, this is how they are treating other SMEs I better move on before they treat me like that’.

“Given that’s not happening, there clearly needs to be intervention and I’m saying, you know, if the intervention is at a level where it is not business inhibiting.

“But things like, you know, a tribunal, why not right? If that’s what it needs to overcome this market barrier, but we would strongly argue do all of that, but at the same time make the market more competitive because that way all the banks would have a real incentive not to behave that way because otherwise, they lose customers.”

In a bid to boost competition in the banking sector, RBS launched an alternative remedies package, which is part of conditions attached to its £45 billion Government bailout a decade ago.

Tide partnered with ClearBank to bid for a share of the capability and innovation fund that forms part of the package and winners of the first round are to be announced at the end of February.

The company, founded in 2015, is one of a host of digital-only banks that have launched in recent years with the aim of taking market share from high street stalwarts.

It has more than 60,000 customers, and currently has 1.1% of the SME market.

Tide hopes that, if successful in obtaining the RBS grant, the company will be able to increase its share of the market to up to 10% to 16% in five years.